How to Create Lean Canvas for Your Startup

How to start a startup part IV: Lean Canvas

When coming up with your business idea it is important to turn it into a business plan. But getting your thoughts out of your head and into something tangible can be challenging. Developing a traditional business plan can take weeks or months, and although it might be helpful for pitching your business idea, it won't help in capturing and testing out your ideas. For this purpose, it is more beneficial to utilize Lean Canvas, a startup-friendly alternative to the business model canvas. In this article, we will take a look at what is Lean Canvas, why you should use it, and how to fill in the 9 blocks that it consists of. At Pragmatic Coders, we offer Startup Consulting services that include helping you validate your ideas so you can move forward with confidence. Together with our clients, we use Lean Canvas for mitigating risks and assembling the product vision. Keep reading to find out how this planning method can benefit you!

TABLE OF CONTENT

What is Lean Canvas?

Why is Lean Canvas beneficial for startups?

How do you use Lean Canvas?

Problem - start with the problem definition

Customer Segments - define your customers

Key Metrics - how will you measure that you solved the problem?

Solution – your product

Unique Value Proposition - what is so unique about your product?

Unfair advantage - what do you have that nobody else has?

Channels - how to reach your customers?

Revenue streams - how are you going to make money on that product?

Cost Structure - how much will it cost?

Lean Canvas - the bottom line

What is Lean Canvas?

Lean Canvas is a one page business plan for any product idea. It was designed and proposed by Ash Mayura a long time ago. Lean Canvas is a variation of the business model canvas (created by Alexander Osterwalder) for startups that helps put ideas into perspective and validate their hypotheses. This simple but efficient way of describing the business model of your product uses 9 blocks to help you map out important aspects of your business. The blocks cover the:

  • Problem
  • Customer Segments
  • Key Metrics
  • Solution
  • Unique Value Proposition
  • Unfair advantage
  • Channels
  • Revenue Streams
  • Cost Structure

Why is Lean Canvas beneficial for startups?

As mentioned previously Lean canvas is a business model canvas but more entrepreneur-focused and designed for startups at the beginning stage. Some of the main benefits of it are:

 

  • The lean product canvas forces startups to distill their product vision into a simple, concise document.
  • It helps founders focus on the most important aspects of their product and avoid getting bogged down in unnecessary details.
  • The lean product canvas can be used as a tool to help validate or invalidate a startup's business model.
  • It is a valuable resource for communicating with potential investors and customers.
  • It's easy and quick to put together and allows everyone to be on the same page.

 

Taking all of this into account, using Lean Canvas instead of a traditional business plan is the best route for startup founders who want to challenge their ideas before launching an MVP. Additionally, it is easy to change and update as your ideas progress.

How do you use Lean Canvas?

Lean Canvas is made up of 9 blocks that guide you through the necessary areas that need to be considered, starting from the customers all the way to the cost structure. As you move forward you fill in the blocks with information that will help you gain clarity and shape your business idea. To fill in your Lean Canvas you can use a printed pdf lean canvas template, use a whiteboard and sticky notes or use other tools such as Miro.

The Lean Canvas template takes around 20 minutes to complete and should be done in one sitting with your team. You can always come back to it to update your business model or if you need to brainstorm ideas for a new feature in the future. There are no strict rules regarding the order that the blocks should be filled in but in this article, we will present the common method of filling in the Lean Canvas template.

lean canvas

Problem - start with the problem definition

In this part of the Lean Canvas, we focus on the problem that we are going to solve. Without a problem, there is no product or service to offer. Put yourself in the customer's shoes and understand the pain points and challenges they are dealing with. Make a list of one to three problems that you want to provide a solution for. Try not to clutter this space with too many ideas, it's good to start small and as you make progress in your startup journey you can make room for new issues to address.

Customer Segments - define your customers

It's extremely important to get to know the group of users you are targeting. We can use the Lean Canvas model to explore and define potential clients that are struggling with the problem defined in the previous step.

Try to be as specific as possible in defining your target customer as this will help you later with marketing. A common mistake that you should avoid is defining your audience too broadly. Remember that you can't fulfill the needs of everyone. However, if you think that your product could be solving different problems for several customer segments it's beneficial to create a separate Lean Canvas for every customer segment. It is also possible that it will be solving the same problems differently for different user groups.

Getting to know your target market is beneficial not only in the beginning stages of your product but it's something you will have to consider as you move forward with it. A good understanding of your audience will help you improve your product and build strong customer relationships. Check out our previous articles to learn more about how to conduct market research and how to do desk research to get to know your users.

Key Metrics - how will you measure that you solved the problem?

To make sure that your startup is heading in the right direction you will have to pay attention to some key metrics. They will help you keep a close eye on the performance of your business.

Key metrics can range from the number of social media mentions to actual purchases of your product. You can monitor different key activities to learn how your potential clients are using your product and what their impressions are of it.

Solution – your product

This part of the Lean Canvas focuses on describing the solution your product will offer. How will your product answer the pain points of your potential customers? What solution are you going to offer them? Brainstorm the different possibilities of solving the problem and refine your proposed solutions through testing. It's a good idea to actually get out there and interview your customer segments to find out what they truly need.

Remember that nothing in the Lean Canvas process is set in stone - it's okay not to have the perfect solution straight away. But if you use the Lean Canvas method it will help you with getting started. Testing and redefining are all features of a lean startup, so be prepared for making adjustments to your plan.

Unique Value Proposition - what is so unique about your product?

The next step is filling in the section that sits in the center of the Lean Canvas template, and that is the Unique Value Proposition. The UVP is an important element to consider when structuring your business plan. It is your promise to the users and the reason that they should choose your product over the one that is offered by the competition. In other words - what makes your solution unique?

To define your unique value proposition it is a good idea to do some research and check how others are solving the same problem. Are there any existing alternatives to your product? How will your product be different and how will it benefit your users? You need to make sure that you stand out and that people have a reason to choose your product.

Unfair advantage - what do you have that nobody else has?

This part of the Lean Canvas model for your product might be a bit tricky to answer and you might need to revisit it as you make progress. You can think of the unfair advantage as something that your competitors can't copy or buy. It's what makes your business stand out from the crowd. What competitive advantage do you have? Is there anything that you have that no one else could have (or at least it will not be easy for them to have)? To define this it will come in handy to have a clear image of your competitors and their advantages. Our blog post about competitor analysis will help you out with this and provide some useful tips.

Not every product needs to have an unfair advantage from the very beginning. Sometimes fast pace of development, quick hypothesis validation cycle, scalable growth, conquering the market fast, etc. are good enough competitive advantages to start with when filling in the Lean Canvas. Over time you can create an unfair advantage that will become more apparent.

Channels - how to reach your customers?

Since we now have an idea of what problems we are going to solve, who has them, and how we intend to solve them the next step is to define how we are going to reach our prospects with our message.

The next segment of the Lean Canvas is focused on the channels you are going to use. Channels are the advertising and marketing methods that will use to deliver your value proposition. They include both digital marketing and more traditional channels, like radio or TV.

Here, we not only define our marketing and advertising channels but also collect basic information about our customers’ acquisition costs. We will use this data to help formulate our growth strategy.

Revenue streams - how are you going to make money on that product?

At the end of the day, your product should generate some revenue. This part of the Lean Canvas Model is the place to describe how will it be generated. Where will you receive money from? How are you going to price your products or services? What is your product’s pricing model? These questions need to be answered before you launch your minimum viable product. The aim of every startup is to make a profit so make sure that there are ways you can monetize the solution you're providing.

Ideally, you want your income to be bigger than the costs. How you price your product will depend on many factors, however, at this stage you should come up with a rough estimation of how much you can earn from your product.

Cost Structure - how much will it cost?

Last but not least, now that we have more information about our product in place we can start estimating the cost of creating it. Therefore the last part of the Lean Canvas is related to the costs. Make sure to include all of the operational costs of your business in your Lean Canvas model. This could include expenses related to:

  • the product development
  • the cost of customer acquisition
  • market research
  • marketing ads
  • staff and labor costs

Lean Canvas is a great tool for helping you out with getting started and will increase the speed of the estimation process. However, in the long run, you will have to come back to your Lean Canvas and update it as the cost structure will change over time.

Lean Canvas - the bottom line

A key factor in the Lean Methodology is the elimination of waste. The downside of traditional business plans is that they require a long and complicated process and won't help you in the ideation stage. And a conventional business model canvas might not be ideal for companies that are just starting out. As a lean startup, you need a faster way of getting your ideas down by using a lean business model canvas.

Using Lean Canvas you can envision your next steps, cover all of the essential points of your business idea, and test each section through trial and error. Lean Canvas aims to help you create a more complete picture of your business idea and get you started with your MVP. If you have any doubts regarding business models or Lean Canvas you can count on the help of our experts. To learn more check out our Startup Consulting services!

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